International tax arbitrage may be loosely defined as a phenomenon in which an inconsistency in the substantive law of two or more jurisdictions yields a tax benefit that would not be available if the laws of the relevant jurisdictions were completely harmonized. Taxpayers engaging in international tax arbitrage may, for example, be able to duplicate valuable tax attributes, such as deductions or losses. Unlike instances of aggressive tax planning in which taxpayers push statutory tax provisions or judicial anti-abuse doctrines to their limits, international tax arbitrage typically involves cases in which the taxpayer is indisputably compliant with domestic law. Although the U.S. government has sought to eliminate such arbitrage opportunities in a number of instances, either through legislation or regulation, its policy reasons for attacking transactions in which taxpayers are fully compliant with the law have remained opaque. The literature on the subject has explored a number of possible justifications, ranging from the existence of implicit, though initially obscured, assumptions in domestic law to considerations of worldwide efficiency. A common strand running through this literature is the attempt to determine the problem that arbitrage transactions present. Once one has identified the problem, if any, the appropriateness of the governmental response can then be assessed. This article argues that rather than presenting a potential problem, international tax arbitrage may present governments with strategic opportunities to further their interests in the location and control of international investment....